FREEDOM PHOENIXNo Short Supply of Freaking Doom!Sat Jun 30, 2007 21:15
No Short Supply of Freaking Doom!
6-30-2007 • FMNN
I don't know why I am so edgy here lately. Maybe because Federal Reserve Credit last week only increased a little, going up $2.3 billion to $852.3 billion, which is about the same level of Total Credit as it was in January, six months ago. Or may
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No Short Supply of Freaking Doom!
Friday, June 29, 2007
I don't know why I am so edgy here lately. Maybe because Federal Reserve Credit last week only increased a little, going up $2.3 billion to $852.3 billion, which is about the same level of Total Credit as it was in January, six months ago.
Or maybe it is because Anthony M. Cherniawski of thepracticalinvestor.com writes that, suddenly, three Hindenburg Omens have been sighted.
So what is a Hindenburg Omen? Robert McHugh of Main Line Investors, accurately assessing my limited intellectual abilities, explains just the essence of it, which is "the alignment of several technical factors that measure the underlying condition of the stock market - specifically the NYSE - such that the probability that a stock market crash occurs is higher than normal, and the probability of a severe decline is quite high."
Mr. Cherniawski says that according to the facts at Wikipedia.com, this "now confirms the probability of a major decline in the next 120 days. The probability of a move greater than 5% to the downside after a confirmed Hindenburg Omen within the next 41 days after its occurrence is 77%, the probability of a panic sellout is 41%, and the probability of a real big stock market crash is 25%."
He admits that the 77%, 41% and 25% statistics are a long way from any precision as far as forecasting goes, and, "The occurrence of a confirmed Hindenburg Omen does not necessarily mean that the stock market will go down. On the other hand, there has never been a significant stock market decline in history that was not preceded by a confirmed Hindenburg Omen."
And on the third hand, a 77% probability ain't hay, either!
"Closing the 'Collapse Gap': The USSR was better prepared for peak oil than the US" is an essay by Dmitry Orlov at EnergyBulletin.net. He writes, "An economic arrangement can continue for quite some time after it becomes untenable, through sheer inertia. But at some point a tide of broken promises and invalidated assumptions sweeps it all out to sea."
That sounded so strangely familiar! Then I realized that it was a virtual replay of the Father's Day we just had around here! So, suddenly, I was in a panic when I thought that he too was talking about me, and how everyone should get as far away from me as possible because I am worse than worthless and trailing a lot of broken promises (mostly of the "I'll never do THAT again!" or "I'll pay you back!" types) and invalidated assumptions ("He'll change for the better one day!") and how life is too short to waste it with trash like me, and blah blah blah, but he was, thankfully, not. Whew! Once is enough!
Instead, what he was really saying was economics in nature, as in, "One such untenable arrangement rests on the notion that it is possible to perpetually borrow more and more money from abroad, to pay for more and more energy imports, while the price of these imports continues to double every few years."
And why not? He reveals the problem so elegantly, almost Newtonian, when he explains, "Free money with which to buy energy equals free energy, and free energy does not occur in nature."
And how to explain that it IS occurring right now? He easily brushes me off, like he would some pesky fly buzzing around his head, by saying, "This must therefore be a transient condition. When the flow of energy snaps back toward equilibrium, much of the U.S. economy will be forced to shut down."
And what does this mean by "shut down" in terms of the essential staples of modern life like, you know, 24-hour convenience stores with gasoline pumps, 24-hour coffee shops and 24-hour adult novelty stores? I see him mentally check those three items off the list, and then he says we should, "certainly expect shortages of fuel, food, medicine, and countless consumer items, outages of electricity, gas, and water, breakdowns in transportation systems and other infrastructure, hyperinflation, widespread shutdowns and mass layoffs, along with a lot of despair, confusion, violence, and lawlessness."
And what about a gigantic system of governments, all of which think that they can "do something"? One could almost hear his snort of disdain and contempt for the whole idea when he said, "We definitely should not expect any grand rescue plans, innovative technology programs, or miracles of social cohesion."
And that, I am happy to report, brings us to another episode of the famous, award-winning Mogambo Pathos Theatre (MPT). This week's riveting melodrama is an original vignette I call, "Been down so long it looks like The Mogambo was right when he said the damnable Federal Reserve creating all that excess money and credit will destroy us all by destroying our money, and now the stinking gutter looks like up to me."
The curtains open, revealing a silent, darkened stage, except for the single magenta-colored spotlight on The Mogambo, who sits slumped over in a plain wooden chair in the center of the stage, his mighty shoulders gently heaving as he weeps piteously, softly crying out in pain, "Inflation! It's killing me!"
Then, almost imperceptibly, he slowly raises one hand to point towards the heavens, and raising his head and eyes to follow his lead, says with a ringing voice like Richard Burton at his Shakespearean best, "Yet forsooth, the villainous part of 38% inflation in prices is that it is but slow, agonizing death to the poor wretch who has absolutely nothing, in whose mouth is only the dry dust of despair, and whose painful belly is as empty as his pockets. I starve! I suffer! Somehow scraping up $2.25 for a nice, warm, bean burrito supremo was hard enough, and now it's $3.10! Oh, woe, cruel Fates! I wax woeful! Woeful!"
Turning and bellowing to the ether, "May I please borrow $3.10 so that I might not die, and at least fart to amuse myself and others until I can get another $3.10?"
From offstage a chorus of voices calls out, "No way! Go away!"
Suddenly, the air is filled with a wail of babies crying in hunger and a swirl of people sweeping around the stage like ravenous harpies, crying out, "Buy me something nice! Buy me something expensive! Buy me stuff! Buy me stuff!"
Again The Mogambo wails, "Please give me a lousy $3.10!" and again an unseen chorus replies "No way! Go away!" joining the cacophony of babies screaming and people demanding, demanding, demanding money, louder and louder until, reaching a maddening crescendo, The Mogambo snatches up two Uzi submachine guns and starts blasting indiscriminately, eardrums throbbing from the sonic assault, spent cartridge casings flying through the air, shooting the hell out of everything blam blam blam blam blam blam and pieces of wood and plaster and crap are filling the air with dusty debris, blam blam blam blam blam and the audience is screaming and crying and scrambling to get the hell out of there, and it is pure freaking Apocalyptic bedlam! What a thrilling, memorable moment of American theatre!
Then, abruptly out of ammo, with clouds of burnt cordite tingeing the air, the tragic Mogambo falls slowly to his knees, his Mighty Mogambo Head (MMH) hanging. He is beaten, destroyed. Gradually, the cacophonous sound of babies crying, incessant demands for money and his own stomach growling slowly fade, fade, fade away as the scene fades to sinister black, until a leaden silence hangs like a sickening shroud over the dark theatre.
The crowd, hushed at the powerful, powerful scene, erupts with cries of "Boo! Boo! Worst performance ever! We want our money back!" I laugh at them! Hell, they wouldn't know fine, classy art if it came up and took a big ol' crap on their shoes!
But this is not about how my theatrical masterpieces are not appreciated by a cruel and tasteless world, but about what happens when inflation in prices gets out of hand, which comes after inflation in the money supply gets out of hand (made worse by the fact that the money went to pay for the growth of the government, which got waaaAAAaaay out of hand for decades), and everybody gets so miserable that mindless violence seems somehow justified in the face of such overwhelming misery.
But the stupid audience is not interested in this important, timeless lesson, and all they can think of is that they want their stupid money back. I say "Screw 'em!", as they can afford it now that the minimum wage was raised from $5.15 an hour to $5.85 by Congress, which is supposed to offset the staggering, criminal incompetence of Congress in not restraining the awful Federal Reserve, to keep the damned banks from creating too much money and credit, which produces inflation in prices.
And since not even a conceited, arrogant, stupid Congress as conceited, arrogant and stupid as this one can force prices down, they feel utterly justified in forcing wages up to make up for it! Hahahaha! Incompetent morons!
But this is not about how much I despise damned near every government you can name, but that the minimum wage will next go to $6.55 in July, 2008 and finally reach the federal maximum, taking the minimum wage to $7.25 in July, 2009, two years from now.
The total raise is (click click click on the calculator) $2.10 per hour, although in reality, they will make about 7.5% less, as FICA gets its share off the top. So their new, maximum "adjusted gross income net of FICA" raise in pay is about $1.94 an hour.
Let's see, that's a 38% increase in wages in two years, where it will undoubtedly stay for a few years as the economy tries to digest the increases in the prices of everything, including the labor of the guy who was already making $7.25, but is going to be making only minimum wage in 2009 unless HE gets a nice raise, too, creating the wage-price spiral of story and song. So prices will go up!
To prove the inflation I scream so incessantly about, I point to Larry Edelson at MoneyandMarkets.com, who looks at the Commodity Research Bureau's Index, which is a composite of 23 widely traded commodities. "According to the index," he says, "prices of raw materials are up nearly 30% since the first of the year."
Junior Mogambo Ranger (JMR) Len M. writes, "I recall ten years ago when I looked in the local paper that there was a section devoted to just cheap cars for sale. The listing was for cars '$3,000 or less'. Now, cheap cars are listed as '$5,000 or less'. That is an increase of 66.6% in ten years."
And it is not just cars, as all that excess money and credit, supplied by the Federal Reserve so that the government can spend it, seeps into the prices of everything, and already the price of food - yummy, yummy food! - is rising over 6% here in the USA, not to mention food prices rising 7% in China or the big rises all over the world. And so in five years, what is the compounded rate of an annual 6% increase in food prices? 34%! Hahaha! The increase in the minimum wage was only 38%!
It all comes down to what Andy Sutton of My2CentsOnline.com was talking about when he wrote about the "disconnect in understanding between money and purchasing power." To remedy that, he gives us an example: "Say a man in 1933 stuffed twenty dollars under his bed. In 1933, the price of a gallon of gas was around 10 cents. So the twenty dollars was worth 200 gallons of gas."
Now contrast 200 gallons of gas in 1933 with, "In 1970, gas sold on average for 34 cents/gallon. The twenty dollars was now only worth 59 gallons of gas."
Now contrast both of those with, "Today, I paid $2.89/ gallon. The twenty dollars would buy only 6.92 gallons of gas. To recap, the twenty dollar bill that in 1933 bought 200 gallons of gas today only buys 6.92 gallons."
Thus we see in precious gallons the ravages of inflation in prices thanks to the damned Federal Reserve.
TheStreet.com reports that "Paul (R., Texas) is so disgusted with the Fed and its role in failing to stem inflation that he wants to eliminate the entire institution, including its army of economics Ph.D.s and other money wizards", which refers to a bill that he filed in Congress, HR2755, that would do just that.
As Junior Mogambo Ranger H.H.H. puts it, this shows that "Ron Paul will go to his grave with his honor and dignity intact, which is far more than I can say for most members of our government."
Why does Rep. Paul want to eliminate the Fed? Well, according to me at my loudmouth, know-it-all, arrogant best, it is because the Federal Reserve has been a complete, dismal failure in every freaking respect, and especially in their duty to protect the value of the dollar.
Well, nobody ever wants to hear what I think, and so I am happy that the question is admirably answered by the epic truth revealed by Antony Mueller at Mises.org and handily posted at Agora Financial's 5-Minute Forecast. "Central bankers," he writes, "sometimes describe their activity as 'more art than science', which is implicit recognition of their ignorance. The 'art of central banking' is the art of pretending to know what one does not know. Not only is it not a science; it is not even an art. At best, it is alchemy; at worst, it is a gigantic cheat."
Or as the Law of Logical Argument puts it, "Anything is possible if you don't know what you are talking about".
This leads to the Law of Lying and Statistical Manipulation, which I just made up, which is, "If you have a willing, co-conspirator like Congress, then the Federal Reserve can do and say anything it wants, whether it knows what it is talking about or not, and nobody will try to stop them, and the Fed will create so much money and credit that price inflation will destroy us all, which it will, and we are freaking doomed, doomed, doomed as a result."
Vaclav Klaus is Professor of Finance at the Prague School of Economics and is a former Minister of Finance, and is quoted in the Financial Times as saying (although originally in reference to something else), "I am not ashamed of this ignorance of mine. On the contrary, I am ashamed of the confidence of those who claim to know the answer. I see a big difference between science and 'national scientific establishments'. To believe in scientific establishment is impossible, this is just another powerful rent-seeking group."
In short, being just as disrespectful as I can muster, the Fed and the Congress are two symbiotic parasites guaranteeing their own free ride by telling and believing lies, which is only possible under a fiat-money standard, as under the gold standard, "you have fixed exchange rates and free mobility of capital, but you give up domestic monetary policy," says Robert Wright, who is a professor of economic history at New York University's Stern School of Business.
Perhaps because he is at a university that receives huge amounts of government money, he forgets to mention that a gold standard also constrains fiscal policy of the government, too, as they don't dare just spend and spend, because borrowed money has to be paid back by raising taxes! And the spending had better be good, too, because if it isn't (like spending tax money for stupid crap like creating huge entitlement programs and, ummm, funding universities), then the gold will actually flow out of the country as foreigners get scared of our idiocy and take their money away, actually shrinking our money supply!
Therefore, under a gold standard, the government and the banks had to be smart and act smart. Now they don't. And obviously aren't.
If you want to see the real beauty of "gold as money" and the wonderful economic bliss that comes from it, then it is inferred when Mr. Wright brings up "the phenomenon of falling nominal wages."
Note the use of the word "nominal" wages, which merely means wages expressed as a strict dollar amount (such as dollars pe
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